You may have noticed a change in my prices this month. I have been working hard to standardize my pricing these last few weeks, with lots of excel spreadsheeting involved. My goal by the end of the year is to be paying myself at least for my time sewing and patterning for my business. (paying myself for my admin is a whole ‘nother issue I need to tackle) Right now, all of the money I make goes straight back into the business, buying supplies and marketing materials, etc.

I am trying to juggle these two formulas, and also trying to standardize some of my profit margin: 25% if it’s resale, and 15% if its wholesale

That 15-25% profit? It is there to help cover random overhead costs of my business: my car fuel, my administration work hours, my internet, my website, assets like my camera and much more. Is it too high? Is it too low? I’m not sure yet. Only time will tell. Covering those overhead costs depends a lot on how many items a year I sell, as well as how expensive of an item it is, and the total of my overhead costs, all of which I don’t have nailed down yet. I also haven’t been super strict when it comes to these numbers, because the products I sell are so varied in price. So 15% of a $10 item is much much different than 15% of a $400 item. So sometimes I adjust accordingly.

I have no idea if I am doing this right. In fact, I have no idea if there is a “right” way to do it. It is simply what I came up with for now. And this change in pricing isn’t final. My product prices are very likely to change again. Here’s why:

I use discarded and secondhand materials in my work. This means that my material costs are constantly changing. I have tried to average the costs for my spreadsheets, but if there is a big fluctuation in material costs for an item I’m making, its final cost may go up or down to reflect that change.

I am constantly learning. I’m still trying to nail down the best way to calculate my costs, and therefore my pricing. Every new bit of business information I learn can end up changing how I price my products.

I am getting faster at production. When I first make a new product, it may take a while. I have to develop a pattern, and figure out the best way to make it, create a listing, and take photographs. But, the more I sell, the more I make, and the more I make, the faster I get at sewing it, the less time I spend listing and photographing it, and the cheaper it gets to produce, which means I can pass those savings onto you.

Wholesale. This is a whole new ballpark, as you may know. Generally if I wholesale my products through another store, that store will only pay me 50% of what the retail value is. And this changes everything. If I end up wholesaling an item, I may have to charge a little more to get a profit from it. Which means my retail price in my own Etsy shop would have to go up too, so that I’m not selling my product for less money than the boutique down the street. No one is going to go for that. None of my items are currently being wholesaled, so most of my prices right now do not reflect that. Yet.

The moral of this story? Pricing is complicated. And in order to be a profitable business (that can actually pay me) I am doing my best to figure out how to price my items to cover all of my costs. So bear with me as I make changes. They aren’t random, or greedy, or personal attacks on your wallet. They are just a reflection of a small one-woman business trying to figure it all out as she goes.

P.S. I am always open to tips on how to price things! Let me know if you have any suggestions, or see that there is anything I can do better!

Thanks Eddi! It IS complicated, and I'm still learning new parts to it every day. I hope that giving everyone an inside look will help people understand why it can be expensive to buy handmade. And maybe it will help other handmade businesses to take a look at their pricing too!

Reply

Allison

4/13/2016 07:42:48 pm

I think it's really helpful that you included the cost breakdown! Everyone knows that starting a business is expensive, but most people are unclear of just how many areas the money made off an item needs to be allocated. Very informative!